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Banks win in $20bn superannuation lift

Eric Johnston

BANKS and fund managers look likely to be the biggest beneficiaries of the proposed tax shake-up, with more than $20 billion a year in fresh funds to flow into retirement savings once superannuation contributions increase.

The move on retirement savings - one of the key proposals adopted by the Rudd government in the Henry tax review - follows growing calls by the industry for a rise in minimum superannuation contributions.

Some called for a contributions lift of as much as 15 per cent, but the government has settled on 12 per cent.

This would give Australia one of the highest global rates of minimum superannuation contributions in the world.

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National Australia Bank's wealth management group executive, Steve Tucker, said the superannuation guarantee increase was needed to enable more Australians to achieve a comfortable retirement while providing support for the economy.

''There is overwhelming evidence that the current 9 per cent superannuation guarantee contribution is not enough to enable Australians to self-fund an adequate retirement income and the reforms are an important step towards addressing this,'' Mr Tucker said.

The banks already dominate the nation's retail retirement savings market, and some analysts believe the proposed measures could deliver them as much as a 4 per cent increase in earnings by 2014 as the retirement savings pool grows.

Deutsche Bank analyst James Coghill said the underlying message in the government's planned move on superannuation was a positive for the nation's wealth managers.

''Rather than go for the soft underbelly of super's higher income earners to help balance the [budget], government has opted to leave all current tax benefits intact,'' Mr Coghill said.

He calculates that the move to a 12 per cent superannuation guarantee will eventually add 0.5-1 per cent to growth in funds under management.

Still, banks yesterday were looking for guidance on whether the government plans to adopt a 40 per cent tax discount on income from deposits.

Such a measure would substantially increase deposit flows and interest margins for banks, but at the expense of voluntary contributions into superannuation accounts.

Treasurer Wayne Swan acknowledged that a savings tax break was one of the proposals the government would consider.

Bank executives yesterday speculated that such a move, which would bring tax rates on deposits more into line with other forms of investments, could be included in next week's federal budget.